Cutting Costs With Six Sigma

Problems Faced By Companies On The Cost Front

On the cost front, most industries such as the manufacturing industry, service industry, health care industry and even the educational industry are all experiencing a great amount of pressure. As an example, hospitals are facing ever-decreasing compensation from insurance companies, which is a serious concern to many. Hospitals also experience the pressure of high labor costs and low productivity. This decline in revenue has come about due to the increase in costs and the ever-increasing competition. 6 Sigma has always been construed as a quality improvement tool, and quality has always been linked with high costs and expenditures. However, the efforts by the black belts and the master black belts to help save on costs have helped companies view Six Sigma favorably.

6 Sigma And It's Contribution Towards Cost Cutting

Six Sigma was never intended to be used as a cost cutting tool; nevertheless it has made great contributions towards that end. The methodology of 6 Sigma employs unique ways to help cut costs in all aspects of business. Firstly, Six Sigma contributes towards customer servicing. The opinions of the customer alone help define the quality of the products and services provided by any business. By figuring out the customer's needs; 6 Sigma can help by cutting down on any wastage like over-utilization and under-utilization of capacity. Six Sigma also helps stabilize process variation, which helps save on material conversion. Not only does this result in an increase and improvement in productivity and quality, but it also results in the reduced cost of rejection and re-working.

The reduction in Cost of Poor Quality (COPQ) is massive considering the overall tremendous savings coming from practically no rejections. This has come about due to the graduation from three or four sigma to 6 Sigma. For example, in the case of a hospital, after utilizing the Six Sigma methods in it's cardiology department, the hospital can cut down the average process time that is necessary for admission. This produces a dual-advantage. The first one being that the reduction of almost 45 minutes of the process time will lead to a decrease in labor costs. Secondly, the hospital department can now accommodate a larger number of patients because of the increase in the productivity.

The doctrines of total customer satisfaction and returns on investment are the main areas of focus. The 6 Sigma team helps generate innovative and creative ideas that are aimed at controlling costs. The team then helps employ risk management schemes and devises that lead to the early detection of various risk factors. An increase in yield from project portfolios will lead to an increase in resources resolving matters of risk.

The Biggest Challenge Faced By Six Sigma

The biggest challenge faced by 6 Sigma is from the outsourcing or off shoring of business processes. The developing third world countries have a lower cost structure and are attracting the large corporations offering them a chance to increase their overall return on investment. This is a process that is being engaged by medium and small-sized businesses, as the larger corporations have experienced significant success using outsourcing.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.

Value Stream Mapping And Six Sigma

Business processes are similar to a river flowing in a natural direction and carrying information from point A to point B. Value Stream Mapping (VSM) is one of the techniques used in Lean Six Sigma for identifying areas of waste that need to be avoided in both manufacturing as well as office business processes. Aside from identifying areas of waste, VSM also helps in streamlining business processes for achieving higher productivity. VSM is based on scientifically proven methods, making it necessary for organization to employ profession Six Sigma consultants (VSM specialists) during the implementation stage.

The Initial Process

Implementing VSM is a long drawn process where the first step involves mapping the current flow of materials or information in key business processes of an organization. The mapping is done with the help of flowcharts that depict the flow of goods or information from one end to another. The flowchart also contains information about the average time taken for the completion of various sub processes. For generating a comprehensive flowchart, consultants often gather inputs from business heads, floor managers or factory workers. While creating the flowchart, key sub-processes are highlighted using specific icons. This helps in pinpointing areas where waste and inconsistencies are happening. The flowchart also helps in understanding the complexity of a business process, which needs to be simplified for increasing efficiency.

Future State Of Value Stream Mapping

In the next step, VSM consultants discuss each step depicted in the flowchart with the management for finding out ways that would streamline and optimize the whole business process. In Six Sigma terminology, this is referred to as Future State Value Stream Mapping (FSVSM). A number of methods can be used during FSVSM process but only those need be selected that help in streamlining processes without affecting the day-to-day operations of an organization. One such method is Cellular Manufacturing, which can be used during FSVSM. Although it is a simple concept, it requires adequate planning on part of the consultants as well as the management. Takt Time is another method that is used for evaluating lead-time of manufactured goods or services rendered. This method is commonly used in organizations where the main objective is to deliver goods or services in time, for e.g. courier companies. Another method is known as Kanban, which forms a part of Just In Time (JIT) manufacturing system. It helps in maintaining low inventory levels and work in progress without affecting the quality or volume of manufactured goods.

Effectiveness In Automotive And Other Manufacturing Industries

VSM has proven to be very effective in organizations that make use of large and complex assembly line manufacturing processes. Automobile manufacturing companies are probably the best examples as far as the effectiveness of VSM is concerned. Top automobile companies such as Ford and Toyota have successfully implemented VSM in their business processes, which has in turn helped these companies in manufacturing high quality products while reducing costs at the same time.

Although concepts of VSM are applicable in all types of manufacturing organizations, companies other than automobile companies may find it a little difficult to implement VSM word for word. Some consultants also feel that benefits associated with VSM are sometimes over-hyped when it comes to implementing VSM in non-automotive companies. Personal opinions may vary but what is certain is that VSM does help in reducing waste if implemented properly.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.

How To Overcome Six Sigma Controversies

"The more I learn about customer satisfaction, the less I know," the CEO of a Fortune 500 company recently lamented. By the time some companies get to understand their customers? needs fully, it will be too late. Management is often flooded with customer data detailing their satisfaction levels among other things. However, the data has been collected only as an exercise, not as a means to end customer dissatisfaction.

Can?t Anyone Achieve Six Sigma?

There is no doubt that Six Sigma has enjoyed the seat of power like no other management tool has to date. The milestones crossed by the methodology are also non-controversial. Then where are there any problems and why is doubt being cast upon its ability to deliver?

Paddy Rao, Associate VP of a large software services company, a Champion and Master Black Belt himself, cites a major stumbling block for Six Sigma implementation, which is cultural change. A sudden change in the way people work and an altered reporting structure is what people find as obstructions to their routines. ?Sometimes it takes ages to break this mindset?, says another Black Belt who worked with Rao.

Anyone that says they have successfully implemented Six Sigma means only that they have completed the implementation. It doesn?t mean that they have actually achieved 3.4 defects per million. You will notice many things changing as you go about deploying Six Sigma. The market changes, you may see a change in technology or even an internal matter like organizational change can occur.

The Robust Mechanisms Of Six Sigma

As with all other aspects of life, failures are always attributed to Six Sigma but not the successes. A successful Six Sigma implementation essentially requires a rock solid commitment from top management. Despite this, Six Sigma continues to question any authority, critically shaking most of the beliefs that the organization had about itself. As it goes deeper, it potentially shakes the foundations on which organizations exist.

The inordinate delay in data gathering is another obstacle to get Six Sigma out of the starting block. Sometimes the data is not divulged and other times it genuinely takes time to gather. Other priorities coupled with this pushes the implementation team to rush through the deployment.

Add to this the possibility of selecting the wrong project. If this happens, no matter how well you slog out later, the deployment will be a loser from the beginning. You will invariably fail to see a much different result from that of the original.

Indeed, it is the robust inbuilt mechanisms of Six Sigma that have worked for its success in almost all cases. One genuine concern about Six Sigma is about the cost of implementation, which very nearly challenges the ROI. As one CRM specialist put it, ?where ROI has catapulted because of CRM, Six Sigma has been credited for it?. This is the reason that Six Sigma is so widely accepted, despite the costs.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solutions ? Six Sigma Online ( http://www.sixsigmaonline.org ) offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.

Process Simulation And Six Sigma

Six Sigma has become one of the most commonly used quality management techniques since its introduction in the 1990's. The importance of Six Sigma has continued to increase ever since companies like GE began implementing it's various concepts and techniques in their business processes. This has helped the company in saving billions of dollars since the time when the concepts were first implemented.

The Simulation Process

Process simulation is one of the various techniques used in Six Sigma, involving the use of a computerized model of an actual business process. The computerized model used in process simulation is designed by inputting all the critical components of a business process such as process inputs, process flow, and the various sub-systems used in the process. With the help of the computerized process simulation model, process managers can easily view the whole process within a few minutes that would have normally taken days or even weeks to complete in the real world. Process simulation helps in collecting large data samples, which can be further analyzed and used for predicting the effects of changes made in real business processes. This allows analysts to simulate all the possible changes that can be made in a business process and analyzing the effect of such changes on the end result. Changes that are most helpful in improving the quality can be selected and put through more rigorous simulation processes for confirming the potential benefits of such changes. Once this is done, the changes can be applied in the real process as by now it is quite certain that the changes will be successful in improving the quality of goods manufactured or services rendered.

When And Where To Use

Although process simulation is a powerful tool, it must be used in the right manner and only in appropriate business processes. If the necessary information is not inputted correctly, the computerized simulation model will not be able to predict the effect of changes made in the business process. This can seriously affect the quality of end products if such changes are implemented in the real process. Process simulation is most effective when a business process is complicated and difficult to visualize. For less complicated processes, it is better to use process mapping in combination with brainstorming techniques for generating innovative quality improvement ideas. Process simulation is helpful in simulating business processes that require managers to make informed decision at every stage of the process. Process simulation is used for improving the logistics of a manufacturing company by mapping the exact flow of materials from the time they enter the factory floor to the time when they reach the final consumer in the form of finished goods.

Risks And Drawbacks

Although process simulation is very beneficial, it can also create problems for an organization if not used properly. Companies very often make the mistake of employing process simulation in every business process in the hope of improving quality. This can create confusion among the employees, especially when the company and its workforce are new to the concepts and philosophies of Six Sigma. If a process is too long and involves various sub-processes, it is better to concentrate on sub-processes that affect the quality of the end product. Companies often try to simulate the whole process, which leads to the wastage of both time and effort. For realizing the full potential of process simulation, organizations need to simulate only on those processes that are critical to the quality of goods manufactured or services rendered.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.

Six Sigma Adoption and Cultural Issues

The most easily expectable reaction from employees for Six Sigma implementation will be the one of "Well, here they are at it again" or "How good is it over other existing methods?" Knee jerk reactions, such as these are nothing new in an industrial world. Cold responses such as these can dampen the zeal of Black Belts initially, if not completely unnerve them. Why should the culture be so different and how to adopt Six Sigma in these circumstances are some of the big questions that confront the project team.

Cultural Issues - Six Sigma Adoption and Acceptance

Most of the times it is the skepticism that manifests as different issues opposed to the adoption of Six Sigma. Surprisingly enough, skepticism is not just limited to employees alone. Let us say a saving of $250,000 per project seems unreal when you really look at it. Further, it becomes even harder to believe when advertised a higher cumulative amount over long periods of time and several projects. Accrued savings could run into a couple of billions of dollars in a decade's time.

On the other hand, management isn't always open to accepting the migration to Six Sigma from another regimen. Questions may arise, such as "Does it apply to us? It might have produced results elsewhere but this is a unique situation." The question remains same even if the product or process is same as that of competitors. This roadblock predominantly exists because of the wrong conviction that they are somehow different from peers and that it won't work for them.

Take another one for example. "Six Sigma takes fulltime Black Belts which we can hardly afford at the present moment, at the cost of our day-to-day activities. It also requires several others to dedicate some of their time to the project."

Strategizing Six Sigma Implementation

First of all, it is essential that management has an open mind. Six Sigma is applicable across the board, regardless of the size and line of business of the companies. Also realizing the need for it, much later when the market and the top and bottom lines have eroded, will be of little help.

1. The Proof Of Pudding Is In Eating It: Success stories of Six Sigma will have no impact as much as the actual success you could show now. The milestones for impressive results are financial uptrends, better employee satisfaction, and finally the satisfied customer. Measured by the 'conventionally perceptible barometer', the more visibly acceptable changes satisfy the skeptics.

2. Reviewing The Work Culture At The Beginning: There is no better way than assessing the cultural ways of a company and employees' work culture while you are still putting together the project and the team. The support from top down, infrastructure and the context of time will help shape things up for deployment of Six Sigma.

3. Familiarity And Positive Developments Bring About Positive Changes: As things get familiar to people, they tend to see reason and accept spending resources. This basically stems from their realization of returns from the deployment.

Maintaining an environment conducive throughout the deployment is crucial for its success. The transformation it brings in can be far more rewarding than financial benefits alone.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts

5 Laws Of Lean Six Sigma

 

Thinking about how Six Sigma and Lean Manufacturing work well together despite being distinct, independent and complete tools? The combined principles gel so well that they compliment each other and progress parallels to each other on a well-defined path. The paths are defined by the 5 Laws of Lean Six Sigma as we know today.

5 Laws of Lean Six Sigma

The 5 laws have been formulated in order that efforts on improving quality and business process aimed at improving customer satisfaction and ROI as primary concerns. The 5 laws have evolved over time and are a collection of key ideas derived both from Lean Manufacturing and Six Sigma.

1. The Zeroth Law: The first law is called so because all other principles are built upon this fundamental one. It States that the Law of the Market - Customer Critical to Quality defines quality and is the highest priority for improvement, followed by ROI (Return on Investment) and Net Present value.

2. The First Law: This is called as The Law of Flexibility. It states that the velocity of any process is proportional to the flexibility of the process. Interpretation: the more the process is receptive and flexible to adopt changes, the better the progress of the project implementation is.

3. The Second Law: The second law is known as The Law of Focus - it is defined as 20% of the activities in a process cause 80% of the delay. This can be interpreted as main causes of delay of activities originating from just 20% of activities thus enables a faster refocus during the reorientation phase.

4. The Third Law: The Law of Velocity as the third law is known is stated as the velocity of any process is inversely proportional to the amount of WIP. This is also called "Little's Law". This explains how the inertia of WIP, Work in Progress, bears heavily on the velocity of project implementation. Higher the number of works in progress (read unfinished tasks) the lower is the speed of progress due to various ground level handicaps

5. The Fourth Law: The Fourth Law, which is the last of the 5 laws of lean Six Sigma, is defined as The complexity of the service or product offering adds more non-value, costs and WIP than either poor quality (low Sigma) or slow speed (un-Lean) process problems. The bulky nature of products is against the foundation of Lean Manufacturing principles. The bulk, complex manufacturing process and product and service specifications contributes to render the offerings redundant. As an illustration to this 4th Law of lean Six Sigma, you can try and reason out why passenger cars are more and more becoming driver friendly despite their complex engineering features and functions.

You can revisit the definitions of Six Sigma and Lean Manufacturing principles which emphasize eliminating process errors and variations. It also concentrates on efforts to invest less human labor, inventory, and time for product development.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solutions Six Sigma Online ( http://www.sixsigmaonline.org ) offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.